The heady salad days of yesteryear ’90s are over. When cellular operators were spoiled and got away with per minute billing associated with frustrating dropped calls due to capacity shortages. SMS rates that were iniquitous seeing that their cost is actually zero. International roaming charges are still not fair. By allowing their customers access to high speed data networks like 3G and LTE it seems as though they have shot themselves in the foot as the parasitic over the top players OTT capitalise. Google, Skype, Facebook, WhatsApp, Viber, Nimbuz, WeChat and the many other over-the-top (OTT) players regard themselves as traffic creators. Not spongers. They ignore attempts by the cellular operators to engage them in business models that include revenue sharing. The time has come to maximise what remaining brand loyalties they have with rich communications services RCS of their own. Services superior to the OTTs.
By the end of 2017, OTT messaging traffic is expected to surpass 32-trillion messages annually, while SMS will have slowed to 7,89-trillion (Source: Portio Research). This validates the challenges with which operators continue to struggle – the ongoing decline of circuit switched calling and messaging revenue.
There are several options available to traditional operators who are looking to break into the OTT space. Here are five options worthy of consideration:
This is an option mainly for the operators who do not realise nor care about revenue losses to OTT players. By choosing to do nothing, these operators will continue to lose increasing amounts of revenue for calling and messaging. We have received reports that some operators are already losing up to 10% of their annual revenue to OTT players, and this percentage is increasing at a significant rate. In addition to losing revenue, operators may also lose customer loyalty and increase customer churn. By doing nothing, they will also miss the opportunity to gain a strategic advantage over other operators in the market.
Worst case scenarios for operators is to provoke their subscribers by blocking these services as in the case of UAE and Ethiopia. Another way to incite one’s valued customers is to have the regulator allow discriminatory pricing for voice over data calls using deep packet inspection techniques. Moves are afoot in SA to do just this. Data recognised as voice over IP will be charged at up to ten times more than regular data. This action will not delight their customers. Will cause severe churn and is easily avoided.
Joyn is a rich communications messaging service referred to as RCS to compete with WhatsApp et al. It was developed by committees of the five largest European operators over the last eight years. The Joyn feature set is very limited, at best the least common denominator among the advanced OTTs. Even after eight years of development and support by the largest operators in Europe,
Joyn deployment in Europe has been limited to Spain and Germany. Even the main Joyn proponent in Spain, Telefonica, has chosen to implement their own competitive OTT solution in the
United Kingdom. Another key consideration is that Joyn offers no service differentiation among the operators if they all implement the same service. The Joyn feature set offers low monetisation opportunities. All the Joyn features are expected to be offered for free by the consumers. For the operators who implement Joyn, advanced OTTs like Voxox will remain a serious threat to their business.
Furthermore, deploying Joyn typically requires an IP multimedia core network system (IMS), which many operators do not have. Some operators, with multi-network vendors, have tried out rich communications services RCS/Joyn in their environment and faced serious inter-operations challenges.
Less than a handful of operators, like SingTel, have chosen this option. It requires continuous and expensive R&D effort, which is not a core competency of the operators, unlike the Silicon Valley type OTTs who are fast and nimble and able to attract the best developers in the world. They will always stay ahead of what the operators or GSMA can do. Building in-house is likely to become a failed attempt to deliver “disruptive” apps before the OTT players do. Deployments of these “home grown” systems are typically destined to just one market with no large ecosystem or deployments. Hence the return on investment will be very challenging.
Partnering with the right OTT is an easy and inexpensive way for the operators to deploy ahead of their competitors and at low or no cost. They can deploy a disruptive “beyond RCS” OTT solution with a rich feature set in minimal time and at a low cost by allowing the OTT player to host the service and agree to a revenue share plan. This will minimise CAPEX and mitigate any risk. They are able to grow the user base and revenue outside current market “virally”. Another option is to take this a step further and acquire an OTT player, leveraging the solution in a similar way (keeping the talent, developers, etc.).
So the question remains – can operators get back on top despite the increasing OTT threat? That depends on how quickly they act and what course of action they choose to take. As for the success of the strategy, time will tell, but speed is of the essence.
Contact Bill Hearmon, 4G African Broadband Forum, email@example.com